Arthur Andersen, the accounting firm which has seen its reputation savaged by the Enron scandal, came out fighting yesterday, pinning the blame for the company's collapse squarely on management of the energy group.

Andersen's chief executive Joseph Berardino said he was not aware of any illegal behaviour behind the spectacular implosion of Enron last month. The failure of the company, he added, was simply a matter of economics and had nothing to do with the rigour of Andersen's accounting. "This is a company whose business model failed," he said.

Relations between Enron and Andersen deteriorated last week when the firm sacked the auditor for destroyed Enron-related documents.

The comments were made as pressure on Kenneth Lay, Enron's chairman and chief executive, continued to mount. Over the weekend, a lawyer acting for workers who lost their savings in Enron released the transcript of a damning online discussion in which Mr Lay advised members of staff to buy more shares just weeks before the events that sparked the company's collapse.

Mr Lay, who pocketed millions of dollars from the sale of stock, had already been warned by an employee that the company might "implode in a wave of accounting scandals".

In the online chat session last September, he said the third-quarter results were "looking great" and suggested employees "talk up the stock and talk positively about Enron to your family and friends". Mr Lay was reported to have said: "My personal belief is that Enron stock is an incredible bargain at current prices."

Three weeks later, Enron reported a quarterly loss of $618m (£430m) and wrote down $1.2bn of its net worth.

Time magazine today reports that a second employee at Enron had raised suspicions about the complex web of ventures and partnerships that hid the company's debts. Company treasurer Jeff McMahon is said to have been transferred to another part of the business after complaining of the "veil of secrecy" to Enron's former number two, Jeffrey Skilling.

The amount of cash loaned or invested by Enron in off-balance sheet ventures looks likely to have been far higher than originally thought, with one weekend report putting the level as high as $5bn.

The volume of litigation against Enron and Andersen is growing rapidly. With the company's collapse wiping out around $1bn from the retirement funds of public workers in the US, including teachers and firefighters, a number of states have joined a class action due to be filed this week. "We owe it to these public servants to get back as much of their money as we possibly can," said Ohio attorney general Betty Montgomery.

Andersen's attempts to limit the damage from the fallout of Enron's collapse will face further challenge later this week when a number of top executives from the accounting company face the government's energy and commerce committee. They will include David Duncan, the Andersen partner fired last week for destroying documents related to Enron even as financial regulators investigated the company.

Mr Berardino, speaking on NBC, admitted there had been an error of judgment at Andersen but said information had also been held back from the auditors. "We have acknowledged in one case, we did make an error in judgment and that was corrected. And in another case, some information had been withheld that was extremely important to the decision on accounting.

"This is a company whose business model failed. The accounting reflects the results of business activities. And the way these events were being accounted for were clear to management and to the board, obviously in less detail to the board. But at its base, this is an economic failure."

The spotlight is also back on vice-president Dick Cheney who is under pressure to reveal the details of meetings with Enron executives last year, which may have helped to shape the Bush administration's energy policy.

Democrats Henry Waxman and John Dingell are proposing civil litigation to break Mr Cheney's silence on six meetings he held with Mr Lay and other Enron executives.

Mr Cheney, it has emerged, also met with a top Indian official in June to intervene on Enron's behalf over the fate of a project in Dabhol.